Signing an integration contract involves the farmer in an often intense economic and legal relationship with a company. But beware: to be valid and effective, this contract must comply with very precise formal conditions imposed by law. A poorly drafted or incomplete contract may simply be annulled by a judge, sometimes years after it was concluded, with potentially serious financial consequences for both parties. This formal requirement is designed to protect agricultural producers. Furthermore, the livestock sector, where integration contracts are particularly numerous and complex, benefits from specific rules that it is essential to be familiar with. This article sets out the compulsory details of all integration contracts, the penalties for failure to comply, the rules governing their duration, and looks at the specific features of livestock contracts.
For an overview of the definition and nature of the agricultural integration contractRead our main article on the subject.
Mandatory information: precision required on pain of invalidity
The law leaves little room for improvisation when drawing up an integration contract. Article L. 326-6 of the French Rural and Maritime Fishing Code requires that certain information be included in the agreement, whether individual or collective. Failure to include even one of these items will render the agreement null and void. What information is essential?
The contract must specify :
- La naturethe price and qualities reciprocal supplies of products or services. What each party undertakes to supply must be clearly described.
- Le report between variations in the prices of supplies made or acquired by the producer. This clause, which is often complex, aims to ensure a certain parallelism or indexation between the costs incurred by the farmer and the prices he receives or pays.
- The conditions for durationof renewalof review and cancellation of the contract.
The requirement relates not only to the presence of these themes, but also to their precision. Case law is consistent on this point: the wording must be clear and leave no room for ambiguity. For example, the duration of the contract must be explicitly stated; it cannot be implied from the normal duration of a production or fattening cycle. Similarly, the method of determining the price must be sufficiently precise. A contract that makes no reference to a remuneration scale or that fails to provide information enabling the operator's costs and margins to be assessed is liable to be cancelled.
This requirement for precision applies even when the integration contract is the result of a set of separate agreements. All the mandatory information must be included in the package for the transaction to be valid.
The penalty: nullity of the contract
If any of the information listed at article L. 326-6 is therefore heavily penalised: the contract is null and void. This is the sanction most frequently applied by the courts in disputes relating to integration contracts. But what kind of nullity are we talking about?
Case law considers that this is a relative nullity. This means that it is designed to protect the interests of a specific party - in this case, the agricultural producer - and that, as a result, only the latter (or his successors in title) can in principle invoke it. The integrator cannot normally ask for the contract to be annulled on the grounds that it does not contain a mandatory clause. One important practical consequence is the limitation period: an action for relative nullity is time-barred after five years. Very often, however, nullity is invoked by the farmer not as a direct action, but as a defence against a demand for performance of the contract made by the integrator. The adage "the exception of nullity is perpetual" (Quae temporalia sunt ad agendum perpetua sunt ad excipiendum) means that the farmer can raise the nullity in his defence even if the five-year period for bringing an action has expired.
What are the effects What is the significance of this nullity? Like most nullities, it has a retroactive effect The contract is deemed never to have existed. In principle, everything performed under the contract must be returned. This retroactivity leads to the cancellation of acts directly linked to the performance of the cancelled contract, such as an acknowledgement of debt signed by the farmer in favour of the integrator or loans granted by the integrator under the contract. On the other hand, a bank loan taken out by the farmer to finance the operation will not be automatically cancelled, as its cause (the provision of funds by the bank) remains irrespective of the cancellation of the integration contract itself.
Cancellation inevitably raises the question of refunds. Since the contract is deleted, the parties must return to each other what they have received. The new Articles 1352 et seq. of the Civil Code (resulting from the 2016 reform) largely codify the solutions already applied by case law:
- Mutual benefits must be taken into account.
- Where restitution in kind is not possible (e.g. cattle feed has been consumed), restitution is made in value.
- Judges have full discretion to determine the amount of these restitutions. They may, for example, base themselves on an expert report or, as has been judged, on the data in a collective agreement on livestock farming to assess the farmer's work performance, not by applying the agreement itself, but simply as an element of assessment.
- Important point: the calculation of refunds must not take into account the benefits that the integrator could have derived from the cancelled contract. Only services actually provided are refunded.
Duration, renewal and termination: managing the relationship over time
As mentioned above, the duration of the contract, as well as the terms and conditions for its renewal, review and termination, are among the mandatory details required by article L. 326-6. The parties are free to set the initial term that suits them.
However, the legislator wanted to limit automatic renewals, which could trap farmers in an unbalanced relationship over the long term. This is why the Article L. 326-7 of the French Rural and Maritime Fishing Code lays down a specific rule: "Except with the written consent of the parties, no contract may be renewed by tacit agreement for a period exceeding one year.. This means that if the contract comes to an end and the parties continue to perform it without saying or signing anything, it is renewed, but only for a maximum of one year. For a longer commitment, a written agreement is essential.
With regard to the end of the contract, if one of the parties does not wish to renew it on expiry, the law does not provide for a specific notice period. It is therefore strongly recommended that you include a clear clause in the contract specifying the terms and conditions and the period of notice for notifying your intention not to renew the agreement.
Clauses relating to performance
Integration contracts may, of course, contain various clauses governing their performance. These often include clauses relating to liability in the event of non-performance.
They often take the form of penalty clauseswhich fix in advance the amount of damages payable by the defaulting party. These clauses are valid in principle. However, their freedom is limited in sectors where a standard integration contract has been approved by the Minister for Agriculture (which is the case for veal calves and poultry, for example). Article L. 326-5, paragraph 3 of the French Rural Code provides that penalty clauses (or resolutory clauses - which provide for automatic termination of the contract in the event of breach) that are contrary to the provisions of an approved standard contract are null and void. What's more, the corresponding clauses in the standard contract are automatically substituted. Case law has thus ruled that a clause providing for a penalty per "chick not started" is unlawful because it is contrary to the applicable standard contract.
Specific rules for livestock integration contracts
Livestock farming is undoubtedly the sector where integration contracts are the most developed and where there have been the most disputes. The complexity of the relationship (supply of young animals, feed, technical monitoring, trade-in of fattened animals, etc.) led the legislator (as early as the 1980 Agricultural Policy Act) to adapt the very definition of integration contract to this specific sector.
Article L. 326-2 of the French Rural and Maritime Fishing Code provides a definition specific to livestock farming: "In the field of livestock farming, contracts are deemed to be integration contracts where the producer undertakes to one or more undertakings to rear or fatten animals, or to produce foodstuffs of animal origin, and to comply with rules concerning the management of livestock farming, the supply of means of production or the sale of finished products..
What does this definition mean? It establishes a kind of legal presumption integration contract for livestock farming. Contrary to the general rule set out in Article L. 326-1, which requires proof of a reciprocity of supply of products or services, Article L. 326-2 makes it easier to qualify. If the contract requires the farmer to follow precise rules dictated by the company concerning the way in which the animals are reared, the feed to be used or the way in which they are sold, then the contract will be presumed to be a contract of integration. It is no longer necessary to demonstrate that the company itself provides products or services in return (although this is often the case in practice).
This special rule for livestock farming reflects the economic reality that the de facto subordination of the breeder. The company's power to impose its methods, suppliers or marketing channels becomes a sufficient element to trigger the application of the protective regime. This brings us back to the idea of economic dependence, although we must always distinguish between this de facto subordination and the legal subordination that characterises an employment contract. An integrated breeder remains an entrepreneur, but one whose autonomy may be severely limited by the constraints imposed by the integrator. This notion of subordination and economic dependence is also at the heart of the developments in the case law on collective integration contracts.
Obligations and guarantees in the integration contract
Over and above the conditions of validity, what are the obligations and guarantees arising from this type of contract?
It is important to note that the law on integration does not create an automatic obligation for the integrating company to guarantee the liabilities of the farmer. If the integrated farmer is the subject of insolvency proceedings (receivership or compulsory liquidation), the integrating company is not obliged to pay the farmer's debts simply because of the integration contract.
On the other hand, the responsibility of the integrator may be incurred in certain circumstances. Case law, for example, has accepted the conviction of an integrator for complicity in an offence operating an unauthorised classified facility. The company was accused of having encouraged farmers to exceed the thresholds authorised by the contracts they had signed, and of having continued with deliveries and collections without checking that the number of animals was correct. This decision raises the question of the integrator's liability in the event of damage caused by the farmer (for example, pollution due to excessive use of plant protection products) if the company has imposed inappropriate objectives or methods.
Finally, as regards payment of the price due to the farmer, the latter benefits from a specific guarantee when the integration contract complies with an inter-trade agreement or an approved standard contract. Article 2331 5° of the Civil Code gives it a general lien on furniture from its co-contractor (the integrator) for the sums owed to it in this context. These guarantees form part of a wider framework for regulating the farmer's relationship with the market and competition.
The validity of your integration contract and compliance with the rules specific to breeding are essential. For a personalised analysis of your case, our team is at your disposal.
Sources
- Code rural et de la pêche maritime, in particular articles L. 326-1 to L. 326-10.
- Civil Code, in particular articles 1352 et seq. and 2331.
- Law no. 80-502 of 4 July 1980 on agricultural policy.
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